SEC to let companies use Web to disclose material data to shareholders

Computerworld - In a nod to the increasing importance of corporate Web sites and blogs, the U.S. Securities and Exchange Commission this week agreed to let public companies disclose material information to investors on Web sites. Under the new rule, companies would not have to provide the same information on paper in most circumstances.

The SEC voted unanimously on Wednesday to issue new guidance for compliance with the Regulation Fair Disclosure (FD) rules, which require that all investors in a company receive material information at the same time to ensure fairness.

The new guidance, not yet published, will explain when companies can use the Web to provide "public disclosure" under Regulation FD, noted Kim McManus, special counsel in the SEC's Division of Corporate Finance, during an SEC meeting held Wednesday to discuss the issue.

Under the new guidance, companies must consider whether their Web site is a "recognized channel of distribution" and whether the information is "posted and accessible" and, therefore, "disseminated," according to McManus. As part of that evaluation, companies must consider whether their Web sites are capable of meeting the simultaneous or prompt timing public disclosure requirements described by Regulation FD, McManus added.

"The use of electronic media is arguably superior to providing company information the old way," SEC Chairman Christopher Cox said during the meeting. "It can be presented in interactive formats to allow each individual to click through... to the level that is appropriate to him."

Previously, the SEC allowed corporate Web sites to be used only as a part of the disclosure process. Wednesday's ruling allows corporate sites to be the sole means of disclosure, noted Dominic Jones, a blogger at Investors Relations Web Report. The most significant part of the ruling, he said, is that Web-based disclosure must no longer always be in a format comparable to paper-based information.

"That is a welcome clarification and could encourage companies to be more innovative and creative in how they present their disclosures online rather than merely dumping documents in PDF or image-based documents that mirror the printed documents," Jones noted.

The new policy will also lead to cuts in disclosure costs for many companies that pay wire services to distribute their disclosures, he added.

"It could also encourage companies to make investments to improve their investor relations Web sites and facilitate the use of blogs for communication and investors," Jones said. "Importantly, while the new guidance says that companies and their employees are liable for information they post on blogs and discussion forums (not really news), they have no duty to correct inaccurate information posted in comments on their sites by third parties."